The Brexit bomb

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Even in deepest Pakistan one would have had to have been living under a large rock for a long time to have missed the fact that the United Kingdom is leaving the European Union. Viewed from a safe distance – or so I thought – this exercise in political and social discombobulation was all a bit of a sideshow, sampled regularly for the latest updates which generally turned out to be a recycling of whatever the previous update had been and then back-burnered. Again. But this week it was different. This week there was the unedifying spectacle of the government of Theresa May, the asbestos Prime Minister, crashing kamikaze style on to the flight-deck of democracy – the British Parliament.

You have to admire Mrs May, you really do. Courage in the face of overwhelming odds. True grit. Stubborn obduracy. And a display of true-Brit off-the-wall bonkers like I have not seen in many a long year. Time after time she stood up in the House and took a hail of incoming fire that seemingly passed through her leaving no wounds. The Opposition bayed and brayed and its leader, Jeremy Corbyn, a man born to be yesterday’s man, laboured mightily to score a waterline hit that would see the May government slide beneath the waves.

Yet even when the government was defeated by the greatest margin in the whole of British parliamentary history and that is a very long time indeed the ship sailed on, burning, littered with wreckage and crewed by a mutinous crew that would happily assassinate the captain if her possible successor – Corbyn – was not even more terrifying, sails on. The laws of political physics are being defied. It should have gone to the bottom before Christmas, but it is still there and looks like being so for some time yet given the win it had in the vote of confidence held on Wednesday night.

Then there are the power stations. The ones that the Japanese were going to build and still might if Brexit grinds to a shuddering halt. Both Hitachi (this week) and Toshiba (last November) have pulled the plug on two nuclear developments that are crucial to the UK future energy mix. At first sight no Brexit linkage, but dig a little deeper and a BBC journo Mariko Oi had her finger on the pulse in March 2016, before the fateful Brexit referendum, and an interview with Toshiaki Higashihara the CEO of Hitachi. The company would ‘have to review its investments including the nuclear project’ if there was a vote to leave the EU quoth he, and that was before the plug got pulled.

The new nuclear plant at Wylfa in Wales costs £16bn and was meant to be the next in line of a series of new nuclear power stations. The Hitachi group failed to reach a deal with the British government and Mr Higashihara’s words suddenly came into focus. Something over 400 jobs are going to be lost with the Hitachi decision. Other jobs down the line are never going to materialise either. A second Hitachi plant in Gloucestershire is also unlikely to happen. All but one of the UK’s nuclear plants currently running will be offline by 2030. It is interesting that none of the reports I am reading on this latest debacle mention Brexit as a causal factor yet for Hitachi it was on the event horizon before the ejector seat got triggered.

The UK has been a member of the EU for over 40 years, long enough to be a part of the national DNA. Disentangling that skein is complex almost beyond reason, and it is hardly surprising that there is confusion and conflict. It will be two generations before the full effect or consequences of Brexit will be felt, and most of those that voted to leave will be long dead. And does it matter for Pakistan?

Yup. The EU is our most important trading bloc, around 22 percent of total exports. Pakistan was awarded the Generalised System of Preferences (GSP) which is a preferential system of tariffs by the EU in 2013, with a rapid increase in exports from $6.21 bn in 2013 to $7.54bn in 2014. Not exactly small change.

Factor in that our EU exports are dominated by textiles, clothing and leather products and it is not difficult to see that any change in the nature of the trading relationship with the EU is likely, not just possibly, going to have a negative knock-on for Pakistan and its frail economy. Any weakening of the GB pound is going to affect the value of remittances, and with 20 percent of remittances coming from the UK that could add up to a significant ‘ouch’. How about bilateral donorship? The UK is our leading bilateral donor in the education, health and economic sectors. Will the same level of funding survive Brexit? Who knows but the omens are already darkening.

A distant spectator of the Brexit mess I may be but today, this week, right now it laps my doorstep in Bahawalpur. And yours. And everybody else’s by extension. There is a faint possibility that Brexit will not happen. Faint. But if March 29th passes and the UK still has no deal with its erstwhile partners in the EU then we truly are in Terra Incognita. The UK preppers are already stockpiling toilet paper and pet food. My own family has more pulses and grains in the cupboards than usual. Tick-tock…tick-tock…